Ariba and Trade Financing: Discounting 1.5% of Network Invoice Volume is a Start

In banking, technology and treasury circles, one rarely hears any mention of Ariba in regards to trade financing these days. Compared with other B2B tech plays making plays these days on the financing side around new or expanded initiatives such as Taulia, Basware, C2FO, Kyriba, Prime Revenue and others – often times in very different ways and different markets – Ariba has been relatively quiet of late surrounding new initiatives. (But there does appear to be some activity behind the scenes – more on this in the next installment of this series.)

The one area that Ariba has quietly been promoting is invoice discounting adoption, although Ariba does not break out what percentage is being financing by their customers’ own balance sheets versus third-party sources. We suspect the vast majority is balance sheet-based. Based on Ariba’s recently reported numbers, it appears that roughly 1.5% of its current $700 billion volume run rate is being discounted through an invoicing scheme.

(Note: this is a rough estimate based on data available in the public domain. To be more conservative, we might say somewhere between 1.25% and 1.75% of Ariba invoice volume – provided Ariba is not double-counting volume in its network calculations with purchase order and invoice documents exchange – is being discounted.)

This is not bad. In fact, it probably makes Ariba one of the larger providers today with an electronic invoicing or supplier network capability tied to some type of invoice discounting solution. (Note: The capabilities and approaches by different providers can vary significantly.)

Ariba has a long history of investing in – and making bets – on the invoice discounting space going back to building out early discounting functionality and partnering with third-party providers including an early deal with the Receivables Exchange. (Despite investments by both parties, the partnership never really got much traction). Yet more important, Ariba has struggled to get the same mindshare for its accounts payable – including discounting – capability as it has with e-procurement.

We suspect this will change for a variety of reasons, not the least of which is the fact that the combination of Ariba, Fieldglass and Concur network volume gives SAP critical mass to take a portfolio strategy to trade financing, including making investments on both the receivables and payables financing sides. (The opportunity for creating payment and financing disruption in the T&E space is perhaps the most exciting.)

As our analysis continues, we will share some things we are starting to hear about Ariba’s and SAP’s interest in the sector and share our own hypotheses on where this multi-headed ERP and cloud giant may head next in the area.